Characteristics of Japanese Entrepreneurship in the Pre-War Indonesian Economy

P. Post Characteristics of Japanese Entrepreneurship in the Pre-War Indonesian Economy Abstract The role of Japanese companies in pre-war Indonesia is analysed by looking at business organization, strategy, investment, performance and their role in promoting the formation of a national economy. After 1914 business organiza ti on was connected with the 'Southern advance' ideology and propelled by political leaders, Japanese banks and large trading companies. This resulted in a tight intra-regional business network, covering production (rubber, sugar, tim ber and oil), import, marketing and distribution. Direct linkages with Indonesian producers and consumers were established, that continued to func tion also after the Second W orld War. 1. Introduction I The reassessment of Japan's pre-war and wartime role in the socio-economie development of East and Southeast Asia has developed into an interesting and stimulating research topic over the past decade. Important new findings have recently appeared regarding, for example, the emergence of capitalist business elites in Korea and Taiwan, the transformation of the Chinese business com munities in Indonesia during the 1940s, the wartime economie co-operation of the Thai elite, and Japan's central role in the pre-war intra-Asian economy (Man, 1993; Twang, 1987; Sugihara, 1990; Sugiyama & Guerrero, 1994). These studies question the lasting impact of Western colonialism and economie imperialism on modern Asian economie developments. Somehow Japan's inroads into East and Southeast Asian economies have had a more lasting effect and offered Southeast Asian indigenous powerholders a much appreciated alternative to the liberal 1 This paper article some of the main arguments in: Post (1991). Additional research for this paper was made possible by a fellowship from the Royal Netherlands Academy of Arts and Sciences. I would also Iike to thank the Masayoshi Ohira Memorial Foundation for their generous support which made possible a lengthy stay in Japan and Singapore from September 1992 to March 1993. P. Post 297 (democratic) market system professed by Euro-American investors (Post, 1994a). 2 Several studies about Japan's pre-war economic involvement in Indonesia have appeared during the last few years and these have contributed greatly to our knowledge of the subject in regard to colonial Indonesia. So far little is known about how Japanese companies operated in colonial Indonesia and why they behaved as they did. In this article lintend to throw some light upon these matters. As a point of departure I use Wayne Robison's conclusions regarding the way Japanese interests during the early 1970s challenged Euro-American capital dominance in Indonesia (Robison, 1985). I begin by looking at the organizational aspects of Japanese business in the colonial economy. This will show that the overall business organization was closely related to the emerging Nanshinron ('Southern advance') ideology of which repercussions we re increasingly felt in Southeast Asia from the mid-1920s onwards. Closely related to these aspects are the strategies undertaken and the performance of Japanese traders, colonists and business companies in order to gain a foothold in the pre-war Indonesian economy. These strategies were, of course, neither fixed nor static. The reverse in fact was true. Like most busi nessmen, be they Western or Asian, the Japanese entrepreneurs showed great skill in adapting to and benefiting from changing economic and socio-political circumstances. In the same section I focus on the business performance of Japanese enterprises and present some data on Japanese investments in agriculture during the late 1930s. In the concluding section I point out some of the issues regarding the theme of the conference and question its validity in understanding the historical foundations of Japan's current economic dominance in Southeast Asia. 2. The changing organization of Japanese business The organization of Japanese business in pre-war Indonesia was part and parcel of Japanese community organization at large. Like the Chinese migrants, the Japanese had an active socio-cultural life and a tendency to form closely-knit communities. This propensity was reinforced by the awkward socio-political position they held in the plural society of colonial Indonesia. Having been placed on equal footing with Europeans in 1899, the first Japanese migrants (prostitutes, small traders, colonists and fishermen ) were soon to discover that they were not accepted as such by either Dutch colonial officials or the local police. Prior to the First World War they were often maltreated, put in jail or refused an entry permit because the Dutch officials believed them to be Chinese, who were unlawfully demanding a 'European' treatment (Post, 1991, 117- 122). Having no consular representative until 1909 these first migrants had to rely 2 Current!y I am engaged on research into the historica! deve!opment of business ties between Japanese corporations and the pribul1Ii busi ness elites during the Sukarno era. 298 Characteristics of Japanese entrepreneurship in the pre-war Indonesian economy upon themselves for the protection of their businesses interests. From the outset the Nihonjinkai (Association of Japanese) was from the outset the most impor tant instrument in tying the community members together. The first such an association, which would soon have more than fifty members, was founded in Medan in 1897 by two owners of toko Jepang (Japanese retail shops) (Shimizu, 1988: 7). Before the First World War a similar Nihonjinkai, also initiated by local Japanese retailers, had been established in Dobo (1908) where a large Japanese fishing community lived. These associations were set up for cultural, recreative and business purposes, and they became centres of leisure and infor mation. The Nihonjikai were responsible for the maintenance of Japanese cemeteries and arranged fitting funerals for less fortunate community members. They helped newcomers to find their way around, advised on colonial Indonesian law and tried to manage conflicts between Japanese migrants and government officials. The board of the Nihonjinkai consisted of prominent Japanese in the region, usually the original pioneers. When a Japanese consulate was established at Batavia in 1909, 10cal Japanese entrepreneurs had the diplomatic backing they had been looking for and soon Nihonjinkai were also founded in Batavia (1913), Semarang, Surabaya and Makassar (Ujung Pandang). Someya Nariaki, the first consul-general, and his successors travelled a lot. They visited Japanese migrant communities all over the archipelago, and listened to their problems and aspirations. They coerced Japanese settlers to register with the local Nihonjinkai as this was the only way to give them diplomatic protection (cp. Modell, 1969: 130- 169). Having been granted the 'most favoured nation' status under the Trade and Shipping Treaty of 1912, the Japanese government insisted that its citizens in the archipelago be recognized and treated as Europeans. Rather than establishing relations with Dutch trade associations, the first Japanese migrants and entrepreneurs linked up with the Chinese business com munities in colonial Indonesia. Prior to the First World War Chinese-Japanese trade associations were established in Batavia and Surabaya. These associations were founded to increase commercial contacts between the 'East Asian' merchants in Southeast Asia to the benefit of both Chinese and Japanese merchan ts (Post, 1995). The withdrawal of Western capital and shipping due to the First World War and Japan's acquisition of German territory in the Pacific ushered in a new phase in the overall organization of Japanese business in the archipelago. Before that time Japanese economic expansion in the direction of Southeast Asia had scarcely been co-ordinated, but rested instead upon individual initiative and was dependent upon linkages with overseas Chinese trade networks. But with the establishment of the Nanyo Kyokai (South Seas Association) in 1915 and the co ming of the zaibatsu, Japanese banks and large trading companies, and hun dreds of small toko-owners the formal organization of Japanese business was greatly afTected. The years of pioneers, adventurism and karayukisan (the women who went overseas to work as prostitutes to restore their families' incomes) drew slowly to an end and big business moved in, bringing with it serious P. Post 299 administrators and hard-working clerks. In 1918 a total of 624 Japanese entered colonial Indonesia, of whom 30.9 per cent were clerks, 29.5 per cent administrators and 15.9 per cent independent merchants (Post, 1991: 134, n. 13). Nanshinron ('Southern advance') took on the dimensions of a powerful ideological too\. The South Seas Association, a forum of influential businessmen, zaibatsu leaders and high-ranking politicians exerted enormous influence and through the pressure it exerted upon the different ministeries in Japan and Taiwan, Japanese inroads into the economy of colon ia I Indonesia became more integrated. It was just at th is time that the first large-scale research reports on the over seas Chinese dominance in the economy of the Southasian region had been pub lished and we re being widely discussed in business circles in Japan. The reason for Chinese business success was sought mainly in the strong communal ties of the overseas Chinese migrants. Undismayed the Nany6 Ky6kai claimed that the Chinese had one disadvantage: they were not backed by

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